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Vodafone stock vs BT: Both are unattractive but one is better

on Jun 2, 2023
  • Vodafone share price has been under pressure in the past few months.
  • The stock is hovering at its lowest level since 2012.
  • The company has more risks than BT Group, its British peer.

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Vodafone (LON: VOD) share price has been in a freefall this year as concerns about the company continues. The shares plunged to a low of 74.42p on Friday, the lowest it has been since 2012. It has plunged by more than 55% from its highest point during the pandemic. The stock has dropped by 12% in 2023, underperforming BT Group whose shares have jumped by over 24%.

BT Group vs Vodafone

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A common question among London investors is which is a better buy between BT Group and Vodafone, two of the biggest telco groups in the UK. I am not a fan of both companies, as I wrote in my last article on BT recently. For one, the two companies operate in an industry that is difficult to find growth. Besides, it is difficult for people to switch their telecommunication providers.

If you want to invest in one of these two companies, I recommend buying BT Group instead of Vodafone. First, BT Group is mostly a domestic company with no major operations abroad. Vodafone, on the other hand, is a global company operating in 22 countries, with Germany being its biggest market.

While diversification is a good thing, I believe that it is dragging Vodafone’s business. For one, we are in an era where most currencies are plunging, which is hurting the company’s bottom line. Vodafone has operations in Kenya, Egypt, Ethiopia, South Africa, Turkey, and India. Most of these currencies have plunged in the past few months. 

As a result, the total revenue from these countries in euro terms is much lower. These forex risks explain why several companies like HSBC are rethinking their international exposure. BT Group, on the other hand, operates in the UK and is not exposed to major fluctuations.

Second, some of Vodafone’s businesses are not doing well. A good example is Vodafone Idea, which has continued losing market share in India. In Kenya, Safaricom’s profits have dropped in the past three straight years despite M-pesa growth.

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Third, BT Group has less debt than Vodafone. BT Group’s debt stands at over £23.8 billion compared to Vodafone’s £40 billion. In a recent note, an analysis at AJ Bell said

“The company still looks like an over-indebted investment trust of telecoms assets and the new CEO’s plan does nothing to address the structural challenges that face Vodafone.”

Vodafone share price technical analysis

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Vodafone share price

The other reason to avoid Vodafone stock price, for now, is that its technicals are not doing well. The stock has been in a freefall for months. It has moved below the important support level at 83p, the lowest level in December 2022.

Further, the shares remain below all moving averages while the Relative Strength Index (RSI) has moved to the oversold level. Therefore, using trend-following principles, I believe that the shares will likely continue falling as sellers target the next key support level at 70p 

Therefore, while Vodafone looks cheaper than BT Group, I believe that it is a value trap that will likely continue falling in the near term.


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